Generational Change in Chinese ICT Entrepreneurs and their Business Models（NAKAGAWA）
Article
Generational Change in Chinese ICT Entrepreneurs and their Business Models: A Review of A. Saxenian’s Brain Circulation Model
Ryoji NAKAGAWA
Summary：China has already become one of the biggest ICT manufacturing countries in the world. Major factors in Rapid Growth of Chinese ICT Industry are a worldwide division of PC production, new Chinese government policy, market-oriented business strategy of Chinese PC manufacturers, transfer to China of Taiwanese contract manufacturers’ production base, increase in highly skilled human resources, emergence of ICT entrepreneurs, and role of overseas returnees. This article focuses on the latter factor, especially with reference to the role of overseas returnees. In 2006, AnnaLee Saxenian published the New Argonauts, which was based on the “brain circulation” model and at the same time asserted that the connection between Silicon Valley and Hsinchu, the ICT center of Taiwan, had already extended to Shanghai in China. The question of whether this brain circulation model is applicable to the Chinese ICT industry is the main subject of this article. This article concluded that the contribution of returnees must be analyzed from three aspects, that is, generation, field and business model and that Saxenian’s assertion is very important but exaggerated a little bit.
Key Words:China, ICT ,entrepreneurs, AnnaLee Saxenian ,brain circulation, returnees
1. Rapid Growth of Chinese ICT Industry
When the Chinese government began Figure 1 Smile Curve its Reform and Opening Policy in 1978, Chinese GDP per capita was less than Value added Development of prototype High $400. In 1980, the number of telephone After-sales services Parts production subscribers per 100 inhabitants in China Module parts Sales was only 0.63, and in 1983 the development production of machinery compatible with the IBM PC Assermbling had only just started. Under a market- Operation Low oriented and outward-looking policy, process however, China achieved amazingly rapid Upstream Downstream and continuous economic development, so Source: Modified Shih[1996], p.239 Figure 6
（ 219 ） 57 立命館国際研究 23-2，October 2010 that its GDP per capita reached $3,678 in 2009. China has already become one of the biggest ICT manufacturing countries in the world. In 2008, of the world’s PCs, around 40%, or 136 million units, were made in China. As the PC factory of the world, China exported 80% of these, but 20% were sold to the Chinese market, which has also become one of the biggest markets in the world, around three times the size of the Japanese PC market. Lenovo, the top Chinese PC manufacturer, merged with IBM’s PC Division in 2005 and became the world’s third largest PC manufacturer (dropping to fourth, however, after the takeover of Gateway by Acer). As of June 2010, China has 805.3 million mobile phone subscribers, or around 16% of the world’s total and around eight times as many as Japan.
2. Factors in Rapid Growth of Chinese ICT Industry
(1) Global background In 1981, IBM decided to enter the PC market and exchanged its previous closed strategy for an open strategy. To establish a PC standard, IBM adopted an open-spec strategy and sought to cultivate IBM-compatible manufacturers. The company outsourced the manufacture of its CPU and OS to Intel and Microsoft and used contract manufacturers in Taiwan. As a result, a worldwide division of PC production came into being. Under this division of production, countries with lower labor costs have been able to win a concentration of the assembly process and increase sales. As Stan Shih’s smile curve theory illustrated, the added value in this process is less than that in the upstream and downstream processes.
(2) New Chinese government policy Until 1970, the Chinese government made much of independent computer development, but under the global conditions outlined above, it adopted a new policy. In 1983, it began a project aimed at developing machinery compatible with the IBM PC, and in 1985 it adopted a new policy as part of the 7th five-year plan. The new policy emphasized the utilization of mainframe computers and the production of PCs and peripheral products. As for telecommunications, the Chinese government introduced a competitive policy in 1993 to replace the state-monopoly system. The resulting competition between China Telecom, the previous monopoly carrier and China Unicom, a newly set-up carrier, promoted rapid increase in the number of mobile phone subscribers.
(3) Market-oriented business strategy Under the business and political circumstances outlined above, major PC manufacturers such as LENOVO adopted a market-oriented business strategy based on the so-called Wintel technology. This market-oriented business strategy contributed to the rapid growth of the PC industry in China.
(4) Transfer to China of Taiwanese contract manufacturers’ production base Taiwanese contract manufacturers (Quanta, Inventec, Compal, Wistron, and so on)
58 （ 220 ） Generational Change in Chinese ICT Entrepreneurs and their Business Models（NAKAGAWA） transferred their production base to China to save labor costs under the Chinese government’s deregulation of Taiwanese investment in China.
(5) Increase in highly skilled human resources, emergence of ICT entrepreneurs, and role of overseas returnees In 1979, China reintroduced a common university entrance examination and, as economic development progressed, the rate of university entrance rose rapidly (now more than 20%). This increase provided highly skilled human resources to the ICT industry. Moreover, many highly skilled individuals set up their own company and acted as entrepreneurs as defined by Schumpeter. In the 1990s, a number of highly skilled individuals who had traveled overseas for education or career reasons started to return to China because they recognized business opportunities in their motherland. These returnees brought back to China advanced technology and, what was even more essential for the Chinese ICT industry, an advanced business model. This article focuses on the latter factor, especially with reference to the role of overseas returnees.
Table 1 Rate of return to China of students studying overseas Cumulative number of students Cumulative number of Year studying overseas returnees Rate of return (%) (10 thousands) (10 thousands) 1996 27.0 8.9 32.9 1997 29.6 9.6 32.4 1998 30.2 9.9 32.7 1999 32.0 11.2 35.0 2000 34.0 13.0 38.2 2001 46.0 13.5 29.3 2002 58.5 15.3 26.2 2003 70.0 17.8 25.4 2004 81.4 19.8 24.3 2005 93.3 23.3 24.9 2006 106.7 27.5 25.8 Source: Wang [2007] p.7
3. A. Saxenian’s “Brain Circulation” Model
In Regional Advantage, published in 1994, AnnaLee Saxenian analyzed the reason why Silicon Valley succeeded but the R128 area, which flourished as an ICT center until the 1990s, failed. She concluded that the flexible network of Silicon Valley played the key role in its rapid growth in good times and its recovery from bad times. Afterward, Saxenian extended her model worldwide and focused attention on the new phenomenon of the global
（ 221 ） 59 立命館国際研究 23-2，October 2010 movement of highly skilled human resources, which consists of a return to the motherland of the highly skilled individuals who had come to the US, and above all Silicon Valley, in the so-called “brain drain”. Saxenian called this new movement “brain circulation” and asserted that this brain circulation had contributed to the development of the ICT industry in Taiwan and India. In 2006, Saxenian published the New Argonauts, which was based on the “brain circulation” model and at the same time asserted that the connection between Silicon Valley and Hsinchu, the ICT center of Taiwan, had already extended to Shanghai in China. The question of whether this brain circulation model is applicable to the Chinese ICT industry is the main subject of the present research paper.
4. Research Method
Nakagawa [2001], [2008], [2009], [2010a], [2010b], [2010c], [2010d] used a method consisting of three types resulting in nine cells; that is: Chinese ICT entrepreneurs were divided into three generations and three types: domestic careerists, returnees and foreigners (including Taiwanese). Moreover, according to career path and stock holdings, they were characterized as owner type (“O”), internally promoted management type (“M”) or professional management type (“P”). As an exceptional type, entrepreneurs in Chinese telecommunication carriers were characterized as “bureaucrat entrepreneurs” (“B”).
5. Three Generations of ICT Entrepreneurs in China
ICT entrepreneurs in China can be divided into three generations. The first generation, who were mainly born in the 1930s and 1940s and most active in the 1980s and 1990s, contributed to reorganizing state-owned enterprises into market- oriented business entities. Most of them did not have access to venture capital and could not earn large sums from listing their companies on the stockmarket. They were mainly motivated by reorganization itself and are now gradually retiring. The second generation was mainly born in the 1950s and the first half of the 1960s, studied technology at university and distinguished themselves in business circles in the 1990s. They either founded their own companies or succeeded to management positions occupied by members of the first generation. The former group did not generally have access to venture capital but earned large sums of money through stockmarket listing. The latter group did not establish their own companies but were simply internally promoted and took over management positions from the first generation. However, their business and social circumstances were utterly different from those of the first generation. They were professionalized, earned high salaries, and some of them took over as owners while others were later head-hunted as management professionals. The third generation was mainly born in the second half of the 1960s and the 1970s. Typical third generation entrepreneurs had access from the start to venture capital investment to establish their business based on a business plan. They emphasized the business model rather than the technology itself.
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6. Entrepreneurs in the Three fields of ICT Industry of China
For closer analysis, we divide the ICT industry into three sectors. The first sector includes hardware, mobile phone manufacturing, semiconductors and software. The second sector includes telecommunication carriers and the third sector covers net businesses. Entrepreneurs in the three sectors are presented in Tables 2, 3, and 4, respectively.
Table 2 Chinese Entrepreneurs in Hardware, Mobile Phone Manufacturing, Semiconductors and Software Foreigners (including Domestic Careerists Returnees Taiwanese) Liu Chunagzhi (Lenovo M) Liu Zhiren Richard Zhang (SMIC O) Duan Yongji (Stone O) (Neusoft M) Wang Runnan（ Stone O) Zhou Weikun (IBM M) Lü Ming (Great Wall M) First Ren Zhengfei (Huawei O) Generation Tang Ming (CS&S M) Wang Xuan (Founder M) Zhang Yufeng (Founder M) Wang Rongzhi (Tontru M) Hu Gang (Shida O) Wei Xin (Founder M) Wu Ying (UTStarcom O) Li Kaifu Wu Shihong (IBM P) Tang Jun (Microsoft → Google P) Yang Yuanqing (Lenovo M) (Microsoft → Shanda P) Lu Hongliang Guo Wei (Digital China M → O) (UTStarcom O) Chen Zhaoxiong (Great Wall M) Amelio (Lenovo P) Yang Xiu (Tontru O) He Jinghua (Kindee P) Second Sun Pishu (Inspur M) Generation Li Dongsheng (TCL M → O) Shi Yuzhu (Giant, Stone O) Jia Hongbing (Shida P) Wang Wenjing (UFIDA O) Xu Shaochun (Kindee O) Wang Mingjian (TCL M), Xu Lihua (Bird O) Feng Jun (aigo O) Wu Ping (Spreadtrum O) Third Generation Wang Zhidong (Stone → Sina. Deng Zhonghan (Vimicro com → Click O) O) Source: Nakagawa [2010c]
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Table 3 Entrepreneurs in Chinese Telecommunication Carriers Foreigners (including Domestic Careerists Returnees Taiwanese) Zhao Weichen (U B) Yang Xianzu (U B) First Zhang Hainan (S B) Generation Zhang Ligui (T → M B) Zhou Deqiang (T B), Wang Jianzhou (U → M B) Qi Mingqiu (J B) Tian Suning (sN → N P) Xi Guohua (N B) Zhang Chunjiang (N → M B) Chang Xiaobing (T → U B) Second Wang Xiaochu (M → T B) Generation Zhao Jibing (T B) Rui Xiaowu (S B) Xiang Bing (U B) Li Zhengmao (U → M B’) Third Generation Notes: T: China Telecom; U: China Unicom; M: China Mobile; T: China Tie Tong; N: ChinaNetcom; S: China Satcom; J: Jitong; sN: China (Small) Netcom. China (Small) Netcom and Jietong were integrated in China Netcom; China Tie Tong was integrated in China Mobile; China Netcom and the GSM network of China Unicom were integrated in new China Unicom; and the CDMA network of China Unicom and the basic telecom part of China Satcom were integrated in China Telecom. B: Bureaucrat Entrepreneurs，P: Professional Management Source: Nakagawa [2009]
Table 4 Entrepreneurs in Chinese Network Businesses Foreigners Domestic Careerists Returnees (including Taiwanese) First Generation Second Shi Yuzhu (Giant/Stone O) Tang Jun (Microsoft → Shanda P) Generation Qiu Bojun (Kingsoft O) Mao Daolin (Sina.com P) Jack Ma (Alibaba O) Zhang Chaoyang* (Sohu O) Feng Chujun (Wanwa Wang Shen* (TOM P) O → Nothing) Cao Guowei (Sina.com P) Wang Zhidong (Stone → Sina. Victor Koo (YOUKU.com O) com → Click O) Zhu Jun (The9 O) Yang Xueshan (ChinaEdu O Yang Guomeng (TOM P) → Nothing) Huang Bo (ChinaEdu P) Third Lei Jun (Kingsoft P → O) Robin Lee (Baidu O) Generation Feng Jun (aigo O) Chen Xiaowei (The9 P) Ding Lei (Netease O) Chen Yizhou (Oak Pacific O) Ma Huateng (Tencent O) Wang Yan (Sina.com M) Cheng Binghao (Kaixin001 O) Wang Wei (Tudou O) Chen Tianqiao (Shanda O) Zhou Yunfan (Kong.net O) Wang Leilei (Kong.net P) Yang Ning (Kong.net O) Yao Xin (PPlive O)
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Notes:*Zhang Chaoyang and Wang Shen were born in 1964, but are categorized as second generation judging from their business model. Source: Nakagawa [2010a], [2010c], [2010d]
Conclusion
From Tables 2, 3, and 4 and the profiles of the entrepreneurs reviewed in Nakagawa [2008], [2009], [2010a], [2010b], [2010c] and [2010d], we can conclude as follows. Generations and Returnees In the first generation, the role of returnees was limited. Mainly domestic career entrepreneurs contributed to the reorganization of state-owned enterprises. Liu Zhiren of Neusoft is an exceptional case. In the third generation, however, Zhang Chaoyang (Sohu), Robin Lee (Baidu) and so on introduced the search engine and portal site model to China. Moreover, they introduced a new business establishment model, that is, obtaining venture capital investment from the outset on the basis of a business plan and listing on a stock market after several years, for example, NASDAQ.
Fields and returnees In the telecommunication carriers, we find no returnees except for Tian Suning of small Netcom. In this field, entrepreneurs have a China-specific character. They build their careers in the combined field of bureaucracy and business, where opportunities for returnees are limited. In the net business, in contrast, returnees contributed through introduction of new technology and new business models to the development of the Chinese ICT industry.
Business model and returnees Although returnees played a major role in the development of the ICT industry in China, we should nevertheless not exaggerate their role. Even in the third generation, big names such as Jack Ma (Alibaba), Ding Lei (Netease), Chen Tianqiao (Shanda), and Ma Huateng (Tencent =QQ), who not only founded their own companies, but also originated various fields in the Chinese industry, are domestic careerists. They were able to learn the business model from advanced countries directly or from returnees’ companies in China. Moreover, they developed new models more suitable for Chinese business circumstances. We conclude that AnnaLee Saxenian’s “brain circulation” model must be understood in these terms with reference to China.
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über Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzyklus, Duncker & Humblot Gmbh ― [1928] Unternehmer, Handwörterbuch der Staatswissenschaften
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Japanese Nakagawa, Ryoji [2000] International Business Strategy: Globalization of Japanese and Chinese Electronics Industries, Kyoto, Minerva Publishing ― [2007] IT Industry in China: its Role for the Change of the Economic Growth Model of China, Kyoto, Minerva Publishing ― [2008] “Chinese IT Entrepreneurs and the Model for their Formation “The Ritsumeikan Journal of International Relations and Area Studies, No. 28 http://www.ritsumei.ac.jp/acd/re/k-rsc/ras/04_publications/ria_ja/28_05.pdf ― [2009] ““Bureaucrat Entrepreneurs” in Chinese Telecommunication Common Carriers: Chinese IT Entrepreneurs and the Model for their Formation No.2”The Ritsumeikan Journal of International Relations Vol. 21, No. 1 http://www.ritsumei.ac.jp/acd/cg/ir/college/bulletin/ Vol.22-2/04_Nakagawa.pdf ― [2010a] “The Entrepreneurs in Online Digital Contents Industry in China and the Model for their Formation, The Ritsumeikan Journal of International Relations and Area Studies, No. 30 http://www.ritsumei.ac.jp/acd/re/k-rsc/ras/04_publications/ria_ja/31_01.pdf ― [2010b] “The Entrepreneurs in Flat TV and Flat Panel Display Industry in China: Chinese IT Entrepreneurs and the Model for their Formation No. 3” The Ritsumeikan Journal of Economics, Vol.58, No. 5/6 http://ritsumeikeizai.koj.jp/koj_pdfs/58516.pdf ― [2010c] “Generational Change in Chinese ICT Entrepreneurs and their Business Models: A Review of A. Saxenian’s Brain Circulation Model” in Keiji Natsume ed. The Competitiveness of East Asian ICT Companies: the Growing Up and Transnational Movement of ICT Human Resources, Kyoto, Minerva Publishing ― [2010d] “The Entrepreneurs in Online Digital Contents Industry in China and the Theory of “Brain Circulation” and “Creative Class” in International Political Economy on the Intelligent Capital: Globalism on IP, Information and Business Models, Tokyo, Doyukan Publishing
本稿は 2010 年 10 月 21 ～ 23 日 韓国・漢陽大学で開催された東アジア経営学会国際連合ソウル大会 での報告ペーパーに基づいている。また，2010 年度立命館大学研究部研究推進プログラム「基盤研究」「中
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国 IT 企業家とベンチャーキャピタル」（研究代表者：中川涼司）の研究成果の一部である
(NAKAGAWA,Ryoji, Ph. D ,Professor, College of International Relations, Ritsumeikan University, e-mail:[email protected])
（ 227 ） 65 立命館国際研究 23-2，October 2010 中国 ICT 企業家の世代交代とビジネスモデル ―サクセニアン「頭脳循環」モデルの検証―
中国はすでに世界有数の IT 生産国となっている。その成長要因とてしては①モジュール 化による国際分業の進展，②国際分業に即した中国政府の産業政策，③ ICT 企業のマーケテ ィング・オリエンティッドな経営戦略，④台湾の受託専業会社（EMS やファウンドリー）製 造拠点の中国移転，⑤ IT 人材の増大と帰国人材の役割などである。本稿は最後の要因，とく に帰国人材の役割に着目する。2006 年にアナリー・サクセニアン（AnnaLee Saxenian）が「 頭 脳循環」（Brain Circulation）という概念に基づき New Argonauts（邦訳『最新・経済地理 学』）と題された書物を出版し，大きな注目を浴びている。つまり，以前はインド，台湾，フ ィリピン，中国などからシリコンバレーに「頭脳流出」（Brain Drain）がなされ，それがシ リコンバレーの競争力を上げていた。しかし，同時にそれらの国にとっては自ら養成したハイ テク人材の流出であり，大きな問題であった。ところが，今日，それらの「頭脳流出」した人々 の一部が本国に還流し，シリコンバレーの技術，ネットワーク，ビジネスモデルなどを台湾や インドに拡張することで，台湾やインド，さらに中国の ICT 産業が発展した，というのである。 本稿は，中国の代表的な ICT 企業家の経歴やビジネススタイルの分析から，以下のように結 論付ける。すなわち中国 ICT 産業の発展における帰国者の役割については，世代，業種，ビ ジネスモデルとの関連から分析されるべきであり，その分析からすれば，サクセニアンの主張 は重要な指摘ではあるが，一面性は逃れられず，誇張がある。
キーワード：中国， （China），ICT，企業家（entrepreneurs），アナリー・サクセニアン（AnnaLee Saxenian），頭脳循環（brain circulation），海帰（returnees）
（中川 涼司，立命館大学国際関係学部教授，e-mail:[email protected]）
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